IMF cuts world growth forecasts

The IMF on Tuesday lowered its growth forecast for the global economy and warned the outlook could get bleaker if the US political standoff over finances drags on.

The global economy is expected to grow 2.9 percent year-on-year this year and 3.6 percent next year, the IMF said, revising July estimates down by 0.3 and 0.2 percentage points respectively.

Four years after the Great Recession ended, “global growth remains in low gear,” the IMF said in its World Economic Outlook report.

Advanced economies, in particular the US, are showing signs of pick-up, while emerging-market economies, although still accounting for most global growth, are losing more momentum than previously thought, the IMF said.

“Global growth is still weak, its underlying dynamics are changing, and the risks to the forecast remain to the downside,” the IMF said.

Two risks were a particular worry: The US Federal Reserve’s plan to exit the exceptionally easy-money policy it has pursued to pull away from the brink of depression, and China’s slowing growth.

The IMF left unchanged its GDP growth forecasts for the advanced economies, at 1.2 percent this year and 2 percent next year.

In the US, growth in the world’s largest economy would tick along at 1.6 percent this year, picking up to a 2.6 percent pace next year, slightly less activity than the IMF projected in July.

The IMF said the eurozone’s recession this year would not be quite so deep, a 0.4 percent contraction, a 0.1 percentage point improvement from its July forecast.

The European single-currency bloc is expected to return to growth next year, albeit at a tepid 1 percent annual rate.

The IMF predicts Japan, the world’s third-largest economy, will grow 2 percent this year, but slow to 1.2 percent next year under pressure from tightening fiscal policy, while growth forecasts for China were lowered a few tenths of a point for both years, to 7.6 percent this year and 7.3 percent next year.

Growth for Taiwan was lowered to 2.2 percent this year and South Korea would see it slip to 2.8 percent, while IMF projecting Singapore’s growth at 3.5 percent and Hong Kong’s at 3 percent.

It forecast that Taiwan’s economy will rise to 3.8 percent next year, while predicting Singapore, South Korea and Hong Kong to grow at 3.4 percent, 3.7 percent and 4.4 percent next year respectively